Court upholds Assessment order treating inherited shares sale as income. Petitioner granted 30 days for Statutory Appeal.

The Court dismissed the writ petition challenging the Assessment order under the Income Tax Act, 1961 for the Assessment year 2018-2019. The Assessment order treating capital gains from the sale of inherited shares as income from other sources was upheld. The Court granted the petitioner 30 days to file a Statutory Appeal before the Appellate Commissioner and allowed an application for stay of recovery proceedings. The petitioner was directed to file the appeal and application within four weeks to halt the recovery proceedings temporarily.

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Issues involved: Challenge to assessment order under Income Tax Act, 1961 for Assessment year 2018-2019 based on inherited shares and capital gains.

The petitioner challenged the Assessment order dated 13.08.2021 under Section 144B of the Income Tax Act, 1961 concerning the sale of inherited shares from the petitioner's father in Larsen and Turbo Limited. The petitioner was issued notices and a Show Cause Notice, leading to a Draft Assessment Order proposing a re-computation of taxable income. The Draft Assessment Order treated the capital gains from the sale of shares as income from other sources under Section 56 of the Act. The petitioner responded and uploaded an affidavit from his mother in defense.

The petitioner argued that the Assessment order lacked application of mind and violated principles of natural justice, contending that a fair opportunity to explain the case would have led to a different outcome. The petitioner's counsel pointed out a Supreme Court decision emphasizing that income included under specific heads cannot be taxed under residuary provisions. The respondents defended the order, stating that the petitioner did not file a Statutory Appeal against it and failed to provide a proper response to the Show Cause Notice.

The impugned order concluded that the shares were not proven to be transferred by the petitioner's mother, and without documentary evidence, the petitioner's explanation lacked force. The order added the capital gains to the petitioner's income under Section 56 of the Income Tax Act. The Court disposed of the writ petition, granting the petitioner 30 days to file a Statutory Appeal before the Appellate Commissioner and allowing an application for stay of recovery proceedings. The petitioner was directed to file the appeal and application within four weeks to halt the recovery proceedings in the meantime.

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